NEW YORK — Wall Street is optimistic that corporate mergers and acquisitions may experience a resurgence next year, spurred by the potential effects of a new Trump administration that may introduce lower interest rates and relaxed regulatory frameworks.
Currently, the volume and value of deals are significantly lower than they were before the pandemic took hold. According to Dealogic, U.S. deal values have decreased by 23% in 2023 compared to pre-pandemic levels, while the number of transactions has fallen by 20%. Forecasts indicate that this year might see an even steeper decline.
However, analysts believe this trend could shift if the Federal Reserve pursues a more lenient interest rate strategy and if President Trump makes good on his promise to reduce regulations. Plans to cut staff at the Federal Trade Commission could also translate to reduced scrutiny over mergers and acquisitions related to antitrust issues.
Gregory Daco, chief economist at EY, commented, “The administration under President Trump appears set to persist in its deregulatory initiatives across numerous sectors, aiming to ease the regulatory burden impacting the economy and businesses.”
The Fed has implemented two interest rate cuts since September, and market predictions suggest another reduction could be on the horizon next month. For much of 2023 and into 2024, the central bank maintained interest rates at historically high levels, which rendered mergers and acquisitions costlier and less appealing.
In addition, U.S. regulators have been increasing their scrutiny of merger proposals over antitrust concerns. This has led to delays or cancellations of several significant deals over the years.
For example, Kroger’s plan to acquire rival Albertsons for $24.6 billion has been on hold since late 2022 due to the Federal Trade Commission’s assertion that the deal might stifle competition and inflate food prices.
Similarly, Amazon backed out of its intended acquisition of robot vacuum manufacturer iRobot following heightened scrutiny from both U.S. and European regulators. WillScot Holdings, known for providing portable classrooms and mobile offices, also abandoned a merger proposal under pressure from regulatory bodies.
The White House issued updated merger guidelines in late 2023 to reinforce the Biden administration’s tighter regulatory stance, highlighting that unchecked consolidation has been detrimental to competition and consumers.
Moreover, ongoing efforts from U.S. regulators to dismantle Google have instilled a sense of caution within the industry regarding future deals and mergers.